No, a CTO didn't waste money; he got exactly what he needed, cleaner, simpler. No - it doesn't handle every single edge case, nuance, platform - but it does exactly what they needed. They didn't need to spend time patching and grokking twisted, or needing to deal with any rough edges to ramping personnel up on it. They had a job to do, and they did it.
Now that it's out in the wild, maybe someone will cross-pollinate, maybe changes will go in both projects. But the good thing is that they got their job done.
I made tornado work on top of twisted by removing 1,389 lines of code and adding 92 (and I believe most of that was adding compatibility wrappers to keep the API mostly sane).
My effort is not done -- I do have a lot more code to remove. Where it is now, with having mostly just removed code, I can do far more than tornado can do out of the box, and I can do it starting with the same API. I did not modify twisted.
And seriously, these are all insanely smart guys. If they have to "ramp people up", they have to do that with their new framework anyway, but I can't believe that if I can understand twisted, they can't.
I haven't yet looked at tornado, and it's been years since I seriously investigated twisted. That said, even though it's less code to use twisted, not counting twisted, it's going to be quite a lot more after counting twisted, most of which, as you note with "can do far more than tornado can", they didn't want in the first place.
When there's a bug in tornado as it is, they can just fix it. If there was a bug in tornado-on-twisted, and if the bug were in twisted, they'd either have to wait until the twisted maintainers fixed it, or fix it themselves. If themselves, then they end up maintaining the internals of twisted (at least for the time between fix and having the patch accepted), which means they have to keep track of and understand a lot of code that, as you note, they don't have any use for in the first place! In that situation, I might choose to write my own as well.
Now that it's out in the wild, maybe someone will cross-pollinate, maybe changes will go in both projects. But the good thing is that they got their job done.